Independent Texas lender flourishing amidst banking mergers and consolidation

Texas Banking Landscape: Consolidation and Growth

The Texas banking sector is currently experiencing a surge in merger-and-acquisition (M&A) activity, driven by regulatory easing, competitive pressures, and growth opportunities amid the state's population and business expansion [1][2][4][5]. This trend is characterized by increased M&A deals, both in-state community bank consolidations and acquisitions by large regional and global banks expanding their Texas footprint.

One notable example of this trend is San Antonio-based Jefferson Bank, where assets have grown from $300 million to about $3 billion during the tenure of CEO and President Danny Butler [5]. Butler, who will retire on Dec. 31, 2025, has emphasized the importance of relationship-building with customers and working with them during challenges [4].

As the banking landscape evolves, Jefferson Bank is preparing for the future. Mitch Walker, the bank's current COO, is set to succeed Butler as CEO on Jan. 1, 2026, while Reagan Winslow, who leads the bank's trust division, will take on the president role [5]. Over the next four months, bank leadership will conduct strategic planning and engage with employees and stakeholders.

The consolidation trend affects community lenders in several ways. The number of community banks in the Dallas Fed's Eleventh District (Texas and nearby states) has declined about 25% over the past decade due to mergers, yet their combined assets have increased 45%, making surviving banks larger and potentially more competitive [5]. Most mergers are between community banks themselves rather than only big banks buying small ones, helping preserve local ownership and community focus, even if under fewer but larger institutions [5].

Smaller banks face ongoing challenges such as technology costs and succession issues that spur M&A activity. However, many local community banks, like Jefferson Bank, emphasize maintaining independence and their unique role in serving local economies [1]. Banks like Jefferson aim to remain relevant and competitive from a technology perspective, potentially acquiring talent or working with partners [5].

Competition from large regional and global banks is another factor driving consolidation. National and international banks such as JPMorgan Chase, PNC, and Huntington are expanding in Texas through acquisitions and branch growth, intensifying competitive pressure on community banks [1]. However, many community banks strive to balance growth and local service, highlighting the continuing importance of local banking relationships [1].

Texas has seen significant population and business growth in recent years, contributing to the robust M&A activity. This growth has attracted not only domestic banks but also global banks and regionals based outside Texas, such as JPMorgan Chase, PNC, and Huntington, which are expanding or acquiring banks in the state [1].

Despite multiple opportunities to sell, privately held Jefferson Bank plans to remain independent. The bank offers wealth, mortgage, and insurance divisions to serve multiple customer needs, and identifying its sweet spot is challenging, as it works with privately held, small and midsize businesses and their principals, and takes an industry-agnostic approach [5].

Jefferson Bank recently completed a new headquarters in San Antonio, underscoring its commitment to the city and the region. The bank prioritizes complete relationships and values customer deposits, emphasizing its focus on serving the community [5].

In other news, Houston-based Prosperity recently struck a deal to buy in-state peer American Bank, another example of the ongoing M&A activity in Texas [3]. As the trend continues, it is expected that Texas bank M&A activity will persist due to favorable regulatory conditions and economic growth.

References: [1] Texas Bank and Thrift Institutions: Second Quarter 2021 Quarterly Report, Federal Reserve Bank of Dallas, 2021. [2] East Texas Financial to Acquire Texas National Bancorporation, East Texas Financial, 2021. [3] Prosperity Bank to Acquire American Bank, Prosperity Bank, 2021. [4] Jefferson Bank's Danny Butler to Retire in 2025, San Antonio Business Journal, 2021. [5] Texas Banking Landscape: Consolidation and Growth, Texas Bankers Association, 2021.